Supervalu, Starwood, Ingles, Ryland price deals; GMAC jumps, junk mostly up; funds gain $435 million

By Paul Deckelman and Paul A. Harris

New York, April 30 - The high-yield primary market finished off a busy April by pricing four deals - for Supervalu Inc., Ingles Markets Inc., Starwood Hotels & Resorts Worldwide Inc. and Ryland Group Inc.

It was the first time such an activity level has been reached this year. With the face value of the session's new issuance totaling some $2.305 billion, it was one of the busiest days seen so far, second only to the $2.7 billion that priced on April 15 in a pair of mega-deals for HCA Inc. and Crown Castle International Corp.

When the new deals were freed for secondary dealings, Supervalu's was seen having firmed by around a point, but Ryland's two-sided level straddled its issue price. The Ingles Markets and Starwood deals came too late in the session for any meaningful aftermarket dealings, a trader said.

Back among the already-established names, GMAC LLC's bonds jumped on the news that the government will provide aid for the 49%-owned automotive finance arm of General Motors Corp., since GMAC will now assume many of the functions up till now performed by the newly bankrupt Chrysler LLC's own finance arm, Chrysler Financial, in providing loans to car buyers and credit to dealers building their inventories.

Chrysler's not-unexpected Chapter 11 filing, meantime, had little impact on the bonds of GM, which is struggling to avoid a similar fate. Ford Motor Co., which has set itself apart from its troubled "Big Three" rivals Chrysler and GM, continued to firm Thursday, although its Ford Motor Credit Co. bonds were seen mixed.

Outside the autosphere, junk in general was seen mostly higher, with many names up multiple points, extending the strong gains which had been racked up on Wednesday as investors, flush with cash from months'-end redemptions, sought to put some of that long green to work.

Among the gainers was CIT Group Inc., up for a second straight session after losing ground earlier in the week, and MGM Mirage, given a boost by the news that it had lined up financing to save its CityCenter development project in Las Vegas. Regional casino operator Mohegan Tribal Gaming Authority's bonds were quoted sharply better on less-fearsome-than-feared quarterly numbers.

Overall, despite the bankruptcy filing by the nation's third-largest car-maker and the U.S. vice president telling a national TV audience he was urging his own family to stay off commercial airliners because of swine flu, the junk market went on a tear Thursday.

Investors were marking their net asset valuations 1% higher on the day, according to a high-yield mutual fund manager.

Junk funds show $435 million inflow

And as trading was wrapping up for the session, market participants familiar with the high yield mutual fund flow statistics generated by AMG Data Services of Arcata, Calif. -- a key barometer of overall market liquidity trends - said that in the week ended Wednesday some $435.4 million more came into the weekly reporting funds than left them. It was the seventh consecutive inflow, including the $644.1 million cash infusion seen in the previous week, ended April 22.

That seven-week winning streak has generated $4.444 billion of inflows, according to a Prospect News analysis of the AMG figures. With 17 weeks of the year now in the books, inflows have been seen in all but three of them - a losing streak back in late February and early March which saw cumulative outflows of $996 million.

Including the latest week's number, the year-to-date net inflow for the weekly reporting funds has swelled to $7.057 billion, according to the analysis, up from $6.622 billion the week before.

The massive multibillion dollar flow of funds into high yield is seen as having been primarily responsible for the relatively strong pace of new issuance and the solidly positive year-to-date returns that have been seen in Junkbondland for most of the first four months of the year - except for a lull in both the primary and secondary spheres for several weeks that largely coinciding with the three weeks of outflows. The sustained inflows have helped the junk market bounce back nicely from last year's staggering 25%-plus loss and sharply reduced primary activity.

A market source also said that in the latest week, funds which report on a monthly basis rather than weekly were unchanged on the week, versus the week before, when the total was up down by $21.2 million. The latest week's result kept the year-to-date cumulative inflow for such funds at $5.973 billion.

The source also said that on an aggregate basis, consolidating the inflows for the weekly and the monthly reporting funds, a total of $13.03 billion more has come into the funds than has left them, compared with the previous week's aggregate figure of $12.573 billion.

EPFR data parallels AMG

At another fund-tracking service, Cambridge, Mass.-based EPFR Global, analysts also noted that the junk funds had recorded inflows for a seventh straight week, with the $574.2 million cash infusion pushing year-to-date inflows to some $6.61 billion.

Flows into the junk funds "held up despite rising defaults and questions about the short-term future of major U.S. and European carmakers and airlines," declared the company's managing director, Brad Durham, who added that the steady flow of capital towards this asset class "is beginning to drive yields down."

Durham noted that the continued flow of cash into the junk funds was part of a larger pattern which saw cash continuing to leave "the relative safety of money market funds, with investors accepting more risk as they search for higher returns."

While investors evidenced some degree of caution in the face of fears about the economic impact of the swine flu outbreak that started in Mexico as well as concerns about the ability of U.S. banks to pass their "stress tests" - worries which Durham said "sapped investor confidence" - he added that this was mostly reflected by a shift away from equity in the United States and other developed markets - though not in the recently booming emerging markets sphere - to the overall fixed-income category. Besides junk, which by EPFR's calculations has seen some $4.3 billion come in over the last seven weeks, other fixed-income winners were U.S. non-junk bond funds, global bond funds and emerging market bond funds.

While the EPFR junk figures usually point essentially in the same direction as AMG's, the precise weekly and year-to-date numbers generally differ somewhat due to EPFR's inclusion of some non-U.S. funds in its universe. Durham pointed out that the $6.6 billion-plus year-to-date inflow figure includes $1 billion of flows into non-U.S.-domiciled funds.

Any and all cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they comprise considerably less of the total monies floating around the high yield universe than they used to - because there is no reporting mechanism to accurately track the movements of cash coming into the junk market from other, larger sources seen in recent years such as insurance companies, pension funds and hedge funds.

Supervalu a blowout

Finally the primary market saw its second-biggest day by dollar amount of 2009 - and the biggest day by number of deals - as four issuers combined to raise $2.23 billion of proceeds, each selling a single tranche of notes.

Supervalu doubled the size of its deal to $1 billion, and priced the new issue of 8% seven-year notes (Ba3/B+) at 97 to yield 8.58% on Thursday.

The quick-to-market issue, which was upsized from $500 million, priced toward the tight end of the 8½% to 8¾% price talk.

It played to a big order book, which was several-times oversubscribed, according to an informed source who spotted the notes trading in the aftermarket at 98¼ bid, 98½ offered.

"The deal was a blowout," the source commented.

Although there was a lot of reverse inquiry, it was not a pre-sold deal, the source specified, adding that the Supervalu transaction was syndicated on Thursday.

Credit Suisse, Banc of America Securities LLC, Citigroup and RBS Greenwich Capital were joint bookrunners.

Proceeds will be used to fund all or part of the $700 million tender begun on April 30 for Supervalu 2009 notes, Albertson's 2009 notes and Albertson's 2010, and for general corporate purposes, including debt repayment.

Ingles multiple-times oversubscribed

Meanwhile Ingles Markets priced an upsized $575 million issue of 8 7/8% eight-year notes (B1/BB-) at 96.548 to yield 9½% on Thursday.

The yield was printed at the tight end of the 9½% to 9¾% price talk, and the order book was multiple-times oversubscribed, according to an informed source who added that the company is well-known to and liked by high-yield investors.

Banc of America Securities and Wachovia Securities were joint bookrunners.

Proceeds will be used to fund the tender for the company's existing 8 7/8% senior subordinated notes due 2011, as well as to repay other debt, to fund capital expenditures and for general corporate purposes.

Starwood's debut issue

Starwood Hotels & Resorts Worldwide priced a $500 million issue of 7 7/8% senior notes due Oct. 15, 2014 (Ba1/BB) at 96.285 to yield 8¾%.

That was the tight end of the 8 7/8% area price talk.

The deal, which was Starwood's first issue of junk, was run jointly off the high-grade and high-yield syndicate desks, and played to a lot of demand from investors from both asset classes, according to an informed source.

However a market source said that although the deal was multiple-times oversubscribed some investors dropped out when pricing discussions moved into the 8¾% context from the 8 7/8% context.

Banc of America Securities LLC, JP Morgan and Deutsche Bank Securities were joint bookrunners.

Proceeds will be used to pay down the revolver.

Ryland off the high-grade desk

Finally Ryland Group priced a $230 million issue of 8.4% seven-year senior notes (Ba3) at 98.006 to yield 8¾% on Thursday.

The notes were talked at the 8¾% area, according to a buy-side source. That talk was lower than the initial 8 7/8% guidance, according to a market source.

Citigroup ran the books off the investment-grade syndicate desk because of a preference for transacting bond deals from homebuilders in that fashion, according to an informed source.

Proceeds will be used for general corporate purposes.

Thursday's business clears the active forward calendar.

However even though no other deals were announced during the session the new issue market is apt to remain busy, sources say.

Rite Aid Corp. is expected to bring a deal in the near term, sources said on Thursday.

Citigroup will possibly have the books.

New Supervalu bonds strengthen

When the new Supervalu bonds were freed for secondary activity, a trader saw the 8% notes due 2016 move up to 98 bid, 98½ offered.

That was up a point from the level at which the Eden Prairie, Minn.-based supermarket operator's new issue had priced earlier in the session.

Ryland fails to rise

However, Ryland Group's 8.40% notes due 2017 failed to generate any gains in the aftermarket. The Calabasas, Calif.-based homebuilder's new paper was quoted at 97 7/8 bid, 98 3/8 offered, squarely bracketing the company's pricing level at 98.006.

A trader said meantime that Starwood Hotels' 7 7/8% notes due 2014 and Ingles Markets' 7 7/8% notes due 2017 each priced too late in the session for any kind of aftermarket activity.

Market indicators continue rise

Back among the established issues, a trader saw the CDX Series 12 High Yield index - which had zoomed by 1¾ points on Wednesday - up another ¾ point Thursday to end at 78½ bid, 79 offered.

Meanwhile, the KDP High Yield Daily Index, which had jumped 67 basis points on Wednesday, gained another 70 bps Thursday to 58.41, while its yield tightened by 14 bps to 11.95%.

Advancing issues for a second straight session handily led decliners by around an eight-to-three margin.

Overall market activity, measured by dollar-volume totals, rose by 32% from Wednesday's levels.

"Today is one of those of those lovin' life days for bond people," a trader observed - "at least if you're long."

GMAC jumps on federal aid promise

That was especially true if you were long GMAC paper. A trader called the Detroit-based automotive financing company's bonds "one of the big movers" on the day, helped by the news that the newly bankrupt Chrysler's auto-loan arm's functions will be effectively taken over by GMAC - which will get government support to enable it to carry out its new role as provider of auto loans for consumers buying Chrysler vehicles as well as financing for dealers buying vehicles from the company for their showrooms. "There's nothing like the government telling you that they're giving you money" to boost bond prices, he quipped.

He saw the "old" GMAC 8% bonds due 2031 left outstanding after its recent debt exchange, at 60 bid, 65 offered, "up what, like 15 points, or maybe even more?" He said there was "huge size trading" lifting GMAC paper "across the board.

"It was up in all the issues." The activity was "very significant."

"Everything else pales by comparison."

GMAC announced that under the terms of its deal with inked with Chrysler, which announced its not-unexpected Chapter 11 filing Thursday, it will be the preferred provider of new wholesale financing for Chrysler dealer inventory and has a four-year agreement for incentivized retail financing with limited exclusivity.

GMAC said the U.S. government has indicated that it intends to support GMAC in promoting the availability of credit for dealers and customers by making liquidity and capital available and by providing the capitalization that GMAC requires to support the Chrysler business.

GMAC -- which like Chrysler is majority-owned and controlled by Cerberus Capital Management L.P. - will leverage its servicing platform to provide customer service for the newly originated assets. GMAC has not acquired the existing assets or liabilities of Chrysler Financial.

The trader said that the upshot of the news - a huge deal in the junk and distressed markets, although it was overshadowed in the general financial markets by the overall story about Chrysler's bankruptcy - was that "they [GMAC] are not going out of business - and they leaped today."

He also saw good upside movement at the shorter end of the curve, with the 7¾% notes due 2010 having gotten as good as 92 bid, up 12 points "on huge size trading." The issue, he said "is very volatile, up a lot - don't hang your hat on any one level because it's moving even as we speak."

Another market source pegged the 73/4s as having firmed smartly to 93 bid.

GM little changed on Chrysler news

While the Chrysler news, and the role that GMAC will play in the restructuring, was huge news for GMAC bondholders, the widely expected event elicited barely a yawn from holders of Chrysler rival GM's bonds. A trader saw the biggest U.S. auto manufacturer's benchmark 8 3/8% bonds due 2038 unchanged at 8¼ bid, 9¼ offered.

Another trader said that GM's bonds generically speaking were trading in an 8-9 context "not much different" from where they had been trading.

Meantime, Ford Motor Co.'s recently strong 7.45% bonds due 2031 were seen by a trader to be up yet another point at 50 bid, 52 offered.

A second trader said that "Ford was OK today," continuing to benefit from investor recognition that the Dearborn, Mich.-based Number-Two domestic carmaker is quite a different story than those of the beleaguered GM and Chrysler. He saw its 7.45s trade up to 52 bid, 54 offered, which he described as up 3 or 4 points from the levels in the high 40s they held last week.

Ford's Ford Credit unit's bonds were seen mixed on the day, with the 7¼% notes due 2011 seen up as much as 4 points on the day at a mid-73 level.

However, another market source saw the auto lender's 7 3/8% notes coming due in October down about 3 points to the 96 region.

CIT seen better

A trader saw CIT Group's bonds as "another big mover today. You had pages and pages of quotes."

He said the New York-based commercial lender's 7 5/8% notes due 2012 were up 1½ points at 62 bid, 63 offered.

A market source at another shop saw the company's 5.80% bonds due 2036 up as much as 5 points to the 50 bid level, although CIT's 5.20% notes due 2010 were seen down slightly on the session to the 74 level.

At yet another desk, the 7 5/8s were seen up a little more than a point, at just under the 63 mark, while the 5.40s were quoted up ½ point on the day at 60.5 bid.

MGM gamble pays off

A trader saw MGM Mirage's 13% secured notes due 2013 "jump" to 93 bid, 94 offered, "up at least 4 points, on size trading," from the high 80s on Wednesday, following the news that MGM had lined up financing that will enable it to complete its CityCenter development joint venture in Las Vegas.

MGM's 6 5/8% notes due 2015 were seen 6 points better at 57 bid. Another source noted that as of mid-afternoon, some $21 million of the bonds had changed hands, making it one of the busiest bonds of the session.

The Nevada-based gaming giant's 6% notes coming due on Oct. 1 rose to 84 bid, while its 8½% notes due 2010 firmed to 72, each with more than $15 million traded at mid-afternoon.

Another gaming name seen higher, this one in the wake of its quarterly earnings report, was Mohegan Tribal Gaming Authority, whose 6 7/8% notes due 2015 rose as much as 10 points on the day to the 61 area.

The Uncasville, Conn.-based Native American gaming company said that although its revenues were down over 10% year-over-year in the fiscal second-quarter ended March 31, its net income of $33.2 million was just a 0.7% decrease from a year earlier, while its income from operations of $58.6 million was off 5.5%.

The company credited the limited losses to the success of its company-wide cost containment program.

Norampac gains, on no news

A market source saw Canadian papermaker Norampac Inc.'s 6¾% notes due 2013 jump 15 points on the day to a 65 bid context. Noting that "a lot of folks hold the issue," he opined that this did not seem like just the usual bounce-back rally the rest of the market was seeing. However, he saw no fresh Norampac-specific news that might explain the gain.

Another market source saw the bonds push as high as 70 bid near the end of the day before coming off that peak to end in the upper 60s - still well up from the levels in the lower-to-mid 50s at which the bonds had languished last week amid news that it would be shutting a corrugated cardboard processing plant in Quebec.

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